Extract from a Despatch from Earl Grey to Governor Sir George Grey.

Sir,—I have to acknowledge your despatch No. 121, of August 30th last, transmitting the Provincial Councils Ordinance in the form in which it passed the Legislative Council, and explaining with great clearness and in much detail, your views with respect to the system of government best adapted to the existing condition of New Zealand. I have to thank you for the valuable information contained in this despatch. It has been of great service in preparing the enclosed leads of a Bill, which it is the intention of her Majesty's Government to introduce into Parliament in the present session, for the purpose of establishing the legislative institutions of New Zealand on a permanent footing. In transmitting to you these heads, it is necessary that I should explain, somewhat fully, the principles on which the measure is founded, and the reasons for the departure from your own recommendations which you will observe in some of its provisions.

2. The New Zealand Constitutional Act of 1846, together with the Charter and Instructions issued in consequence, so far as related to the establishment of representative institutions, were suspended for five years in 1848, in consequence of the page 74 representations made by yourself, of the danger of introducing those institutions, in a part at least of the islands, at that particular conjuncture. By the Act passed in order to effect that suspension, large powers were vested in yourself and the existing Legislative Council, to establish such institutions of a provisional character during the suspension as you might deem fit.

3. These powers you employed, in the first place, by constituting Provincial Councils on the model of the General Legislative Council. Subsequently, as the increase of the settlement and the quiet and orderly condition of the native population convinced you that the dangers which you had at first apprehended were in the course of removal, you urged on her Majesty's Government the expediency of commencing the introduction of the representative principle into the government of New Zealand, before the period allotted for the suspension of the Charter should expire.

4. Her Majesty's Government, in the continued exercise of that confidence in your judgment and knowledge of the peculiar state of society in New Zealand which had originally induced them to accede to your proposal for deferring the grant of representative institutions to the colony, believed that no better course could be taken than that of relying on your opinion on this subject also; and you were therefore instructed to avail yourself of the power Parliament had entrusted to you, by taking measures for the establishment of Representative Provincial Legislatures. In accordance with these instructions, you have introduced the Provincial Councils Ordinance, which was first submitted to me in draft with your despatch of October 24, 1850, and which you have now transmitted in the form of a law.

5. I take the opportunity, while thus detailing the history of these transactions, to mention that my despatch of the 2d April last, acknowledging the receipt of the draft of this Ordinance, does not appear to have reached you before it was passed into law, as certain amendments which I then pointed out as desirable have not been inserted in it. I still trust, however, that may hear from you in reply to that despatch, if not before the Bill which has been prepared must be submitted to Parliament, at all events in time for the consideration, during its progress, of any remarks which may be suggested to you by ray observations on the draft Ordinance.

6. Under these circumstances, if no further steps were taken by Parliament with reference to the New Zealand Constitution, the suspending Act of 1848 would expire on March 7, 1853, page 75 The Provincial Councils Ordinance created under it would therefore also expire, together with the existing Legislative Council; and the Constitution framed in and under the Act of 1846 would, ipso facto, take their place.

7. Her Majesty's Government, however, on a deliberate consideration of the various despatches which you have addressed to me, have come to the conclusion that it would be ipexpedient to leave the Act of 1846 to come thus into force; because they are of opinion that the changes which have taken place in the state of affairs in New Zealand, and the additional information which has been obtained since that measure was passed, suggest the propriety of various modifications, both in its substance and form, although its essential principles ought, in their judgment, to be preserved.

8. The most important of these principles, and that which, in fact, formed the foundation of the whole measure, was the creation of co-existing General and Provincial Legislatures. On the question whether this arrangement ought to be adhered to, her Majesty's Government have not failed to give full consideration to your own views and statements, and to those also which have reached them through you from various bodies of settlers in New Zealand, both for and against the scheme of Provincial Councils. The result of their deliberation is, that they concur with you in believing that the natural features of the island, the distance of the settlements, the severalty of their local interests, however common those interests may be on some subjects, and the consequent difficulty of forming a General Legislature which should suffice to perform all the ordinary functions of legislation, all present arguments confirming the views entertained in 1846 in favour of the creation of local Legislatures.

9. With respect to the number of Provinces into which New Zealand should for the present be divided, her Majesty's Government have seen no reason for dissenting from your proposal; and it is intended to establish five Provinces accordingly; making, however, provision for the creation of additional Provinces by the authority of the Legislature, if this should here after become necessary, owing to the formation of new settlements.

10. It is intended that it should be left to yourself to define the limits of these Provinces, subject to this general rule, which is not contained in the heads of the Bill, but to be followed by yourself as a guide in the exercise of this power; that they are to extend only over the portions of the islands occupied by Europeans; reserving, however, a power of gradually extend page 76 their boundaries, as this may become necessary, by the settlement of the country.

11. It appears to her Majesty's Government that there remaining region, still of comparatively far greater extent, which is occupied by natives only, or almost entirely, ought, for various reasons, which will more distinctly appear in the course of this despatch, to be left under the control of the General Legislature alone; though hereafter the limits of the territory comprised in provinces will probably require to be from time to time enlarged.

12. With respect to the powers to be entrusted to these Provincial Counrils, I am disposed, for my own part, to believe (notwithstanding the alterations which you state to have taken place in your own views on this point) that in the progress of events, as colonization extends, and the several settlements are drawn nearer to each other in boundaries and interests, they will very probably assume more and more of a municipal character, while the functions of the General Legislature will increase. But T do not think it would be advisable to introduce any special provision either to accelerate or retard such a gradual change. Anticipations as to the course which political affairs may hereafter take are everywhere liable to be disturbed by many unforeseen events, and most of all in new and advancing societies. Hence it seems to be the wisest course to rest satisfied with adapting the institutions which are to be established, as well as may be practicable, to the existing state of things, leaving their future development, and the alterations which a change of circumstances may hereafter require, to be effected by the local authorities thus created.

13. Without seeking, therefore, to determine whether the course of events will lead to an extension or restriction of the powers now about to be conferred on the Provincial Councils, it is proposed for the present to confer upon them a general power of legislation, subject to certain specified exceptions, which will be the same, or nearly so, as those established in your Povincial Councils Ordinance. The powers of the General Legislature, on the other hand, it is intended not to limit to any particular subjects. Its enactments alone would thus have the force of law on the subjects reserved to it, and they would also have paramount and superseding force on all those other subjects over which both it and the local Legislatures are meant to have authority. By this arrangement no conflict of powers can arise, since that of the General Legislature will always prevail whenever it may be exerted, and it will be left to experience, and to the judgment of the colonists themselves, page 77 to determine to what extent this power should be used, and the action of the subordinate Legislatures consequently restricted.